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Greens fall for Liberals’ divide and conquer tactics

One lesson the Abbott government learnt from the massive backlash against its unfair anti-worker and anti-poor 2014 Budget was to hasten slowly.

Thus they have dumped the Medicare co-payment of $7 or $5 depending on which iteration we are talking about. They also dumped cutting the current Medicare rebate from $37.10 to $32.10. However they are not indexing Medicare rebate amounts till 2018, which means the $37.10 will remain in place despite increasing cost pressures on bulk billing doctors through for example increased rents and increased staff wages. Those doctors will be tempted to impose a co-payment of their own, or abandon bulk billing all together.

The Abbott government has also dumped the idea of a six month wait to get the dole, replacing it instead with a one month wait.

In both of these changes the intent is still obvious – in the one case attack a form of socialised medicine by imposing market signals, and in the other case putting downward pressure on wages by further impoverishing a section of the potential workforce.

Both would have saved the government money not by targeting the rich and capital but by targeting the sick and the unemployed. The burden of the cuts would have been felt most by workers and the poor.

The 2014 Budget also attacked age pensioners (retired workers) by changing the indexation from the higher of the increases in the Consumer Price Index (CPI) or the Pensioner and Beneficiary Living Cost Index (PBLCI) and benchmarked against Male Total Average Weekly Earnings (MTAWE). This attacked all 2.4 million full and part age pensioners by effectively cutting their increases over time. Historically MTAWE has been higher than CPI.

In addition the government proposed freezing the indexation on income and asset test thresholds for all pensions, allowances and benefits. This was to start in 2017.

The Age Pension is the Commonwealth’s largest expense program (after revenue assistance to the states and territories), and expenditure on pensions for seniors, people with disability and carers will total almost $67 billion in 2014–15 (not including expenditure on pensions for veterans or single parents).

The ‘cost’ to Government of the age pension in 2015-16 will be $44 billion a year. Their 2014 Budget proposals would have saved almost $2 billion over 4 years.

Australia doesn’t spend that much on welfare compared to other OECD countries.

Public social expenditure as a percent of GDP, 2007, peak-level after 2007, and 2014

Abbott and co want to save money as part of their Budget deficit fetish and to continue the long term move away from the pension as a right to the pension as a welfare payment and a safety net. This itself is part of the wider agenda to shift more wealth and income from labour to capital.

In the 1992 Keating introduced compulsory superannuation with the initial 3% contribution paid for by a foregone national wage increase of that amount. This was part of making the pension a safety net rather than entitlement. What drove Keating was the fear of people living longer and the ‘cost’ to revenue. Only under capitalism can growing older be a threat.

While the Super Guarantee ostensibly comes from employers who make the payment, the real cost is borne by workers in the form of that initial foregone wage increase and reduced wage increases ever since.

These Green/Liberal pension changes reduce the rate of increase of government spending on the age pension; they may also see many older workers stay in the workforce beyond the time they want to or should retire (as does extending the pension age from 65 to 67 – Labor’s dirty work – or 67 to 70 – the Liberals’ dirty work.) Other retirees might decided to draw down on their assets or alternatively fritter them away till they are below the asset test.

The 2015 Green approved cuts will save a little more than the Liberals 2014 proposed cuts. And they set up a process for further tightening and cuts. $44 billion on the pension is a lot of money to a neoliberal government and Abbott and co will continue to target it. Thin edge of the wedge and floodgates come to mind.

The changes may also force more and more workers to postpone present spending (i.e. wage increases) for future spending through increased superannuation saving. If you do however, because superannuation is included in the asset test, you’ll lose the pension. Win/win for the Liberal government (and for a future Labor government when they get in and don’t reverse the changes.)

The ‘reforms’ are also about penalising those who don’t forego more wages now for a future unsure superannuation pension payment.

Not only that but the other thing the government has learnt from the massive opposition to the 2014 Budget is to create ‘winners’ and losers. This is the divide and conquer tactic the Greens appear to have fallen for. It naturalises the attacks.

The losers from the pension change are pretty obvious. They are the 91,000 the retirees will lose their part pension and another 235,000 will have their pension reduced. Contrary to the line the Greens are spinning, these people are not rich. The rich are people like Don Argus who gets a tax free superannuation pension of $1.2 million along with his wife. Nothing the Greens have done will ensure top 10% who get 38% of the benefits of the superannuation tax concessions will pay any extra.

The winners, with a few crumbs from the table of the feasting lords and barons, are those 170,000 pensioners getting a $15 weekly increase. It could and should be so much more for all pensioners. Indeed Van Badham says that the $15 is ‘a rise that CPI pressures made likely to happen anyway.’ So the winners are not really winners. They are just receiving roughly what they would have received anyway.

And that’s the political beauty for the government in this. While we are splitting hairs arguing over which worker is slightly richer than other workers, and admiring the government for its sleight of hand in giving a few crumbs to a few pensioners, the rich are laughing all the way to their tax free superannuation bank. And it is not just superannuation. As ACOSS has revealed in its report Inequality in Australia: A nation divided, inequality continues to increase in Australia. As the report says ‘a person in the top 20% wealth group has around 70 times more wealth than a person in the bottom 20%.’

The main winners out of this winner/loser strategy are the Abbott Government and the really rich. The government will use the same divisive model again. Public school fees anyone?

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Comments

It’s good form to title a graph and label the axes. In this case, presumably, ‘Age pensions/Total welfare payments/whatever as a percentage of GDP/MTAWE/whatever, OECD countries, 2007 and 2014’?

Comment from SobekTime June 23, 2015 at 1:15 pm

“Contrary to the line the Greens are spinning, these people are not rich. The rich are people like Don Argus who gets a tax free superannuation pension of $1.2 million along with his wife.”

But they ARE rich. Not as rich as some other people, it is true, but rich nevertheless. The small increase to pensions at the bottom end is not enough (though I notice some groups opposed suggesting it is too much) but it is a start.

“Nothing the Greens have done will ensure top 10% who get 38% of the benefits of the superannuation tax concessions will pay any extra.”

This is a separate issue. It seems as though Labor were holding out on the pension changes in an effort to get the government to change on this, but it probably wasn’t going to happen. The changes, in and of themselves, are good policy and it makes sense to support them.

Comment from LorikeetTime June 23, 2015 at 5:24 pm

Plenty of people in their 50s and 60s are having to access their superannuation holdings early due to unemployment.

Charging fees in public schools and hospitals have been on the agenda for quite some time.

I don’t believe Paul Keating was at all concerned about an ageing population when he brought in compulsory superannuation. He did it primarily to empower global bankers and the rich.

Government expenditure on pensions would be lower if the banks were forced to pay reasonable interest rates on at call accounts and Term Deposits. Also, nothing appears to stop them from charging like wounded bulls on credit card debt.

I strongly suspect that the Greens will lose a large section of their voter base for selling their souls to the devil.

On what basis do you say that people who have worked for 40 or 50 years on the average wage and have assets (including superannuation) of a bit over half a million are rich? The superannuation/pension issues can’t be separated. The Greens attack middle Australia and their pensions while the rich superannuants get off scot free. Priorities.

Comment from LorikeetTime June 24, 2015 at 7:05 am

Thanks, John.

Methinks too many people listen to Tony Abbott’s misrepresentations in the parliament.

I agree with your view that a $30 increase to the Age Pension in 18 monthsl’ time is nothing to write home about. It could even be a backslide against the real cost of living.

I am also sick and tired of people trying to separate out financial issues, or even broader interactive issues, mostly in order to nullify someone else’s argument (Sobek above).

I also disagree that any attempts by government to send their own nation backwards is good policy.

I do understand, however, that a very young person at the beginning of his/her working life would consider someone with a modest home and $547,000 in assets to be rich. But if such a person did the Maths, they would come to understand that the current interest rates would yield an annual income several thousand dollars less than the Age Pension. Another important consideration is that the $547,000 would include furniture, vehicles, clothing and all other personal effects which are mostly depreciating liabilities (not earning an income at all).

It is also important to remember that interest rates are expected to go down, and that banks want to charge 0.5% to protect our financial holdings from a GFC. Some bank accounts are already paying little or no interest at all, while credit card charges are astronomical.

John, what do you think of the idea of linking the Assets Test to prevailing bank interest rates?

Comment from LorikeetTime June 24, 2015 at 7:17 am

Something to ponder:

Why should an elderly person be crushed like a cockroach when his/her partner dies, when 2 people’s assets become one, and the remaining grieving partner has possibly claimed on a Life Insurance Policy?

Readers would be wise to step out of their own shoes into someone else’s before listening to the Abbott/Hockey razor gang, who yesterday labelled pension cuts as PROGRESSIVE and health cuts as MODERNISATION. It’s interesting to note that both of these ideas most greatly affect older people.

Here in Queensland, ordinary citizens were not even invited to attend the Medicare Local Health Forum this year. The website clearly states that participants would be able to liaise with other stakeholders. Clearly the patients are no longer considered to have a stake in their own health concerns.

In 2013, under a Labor government, anybody from the community could attend free of charge. In 2014, under a Coalition government, you had to state your interests and affiliations to receive one of a limited number of free tickets if you didn’t represent an organisation. In 2015, the free tickets were reserved for those representing not-for-profit organisations only.

When I queried why I had not been invited to attend, I was told I could go if I wished to pay $199.00, having already missed out on the early bird payment of $169.00. I think these charges are outrageous anyway, which is probably why there are large numbers of empty seats at these forums.